Nick Clegg will be watching the fortunes of Germany's Free Democratic Party (FDP) with interest. The junior coalition partner in Angela Merkel's government was badly defeated in the recent Baden-Württemberg election. Guido Westervelle has decided to end his ten year leadership of the FDP but continue as Germany's Foreign Secretary. He hopes that this will ensure the FDP retains its role in government but that, under a new leader, his party can reverse a slump in the opinion polls (from 15% to just 5%). This resign-only-as-party-leader strategy is one I think Nick Clegg might need to take, but only towards the end of this parliament.

Part of the reason for the decline of the FDP has been Westervelle's failure to convince Merkel to prioritise supply-side tax cuts over and above her cautious fiscal conservatism. Lower taxes had been such a defining selling point for the FDP that a failure to deliver them has hurt Westervelle's partly very badly. The FDP has also been the country's most pro-nuclear party in a country that has reacted very strongly to events at the Fukushima plant in Japan.

If the FDP doesn't recover and win the 5% plus that is necessary to win any seats in Germany's system of proportional representation, the CDU will be left without a natural partner in government. This has led some (including the FT (£)) to speculate that an alliance with the Greens might one day be necessary. A Green/ CDU alliance was formed in Hamburg but ended badly. Mrs Merkel has dismissed the possibility as a "fantasy" and it is certainly hard to reconcile the social liberalism of the Greens with the social conservatism of the CDU's Bavarian arm (the CSU). Nonetheless there is an emerging faction within the Greens that emphasises budgetary responsibility that might make it possible.

In terms of the FDP's future, the Süddeutsche Zeitung (quoted by Der Spiegel) wishes that it could go back to its centrist role of moderating both of Germany's big two parties:

"Despite all its failings, the FDP used to have the reputation as a wise, clever party. That attracted voters. It no longer has this pulling power. In its heyday, the FDP was a fertile opposition within government: in the conservative governments of Konrad Adenauer and Ludwig Erhard, the FDP left its mark as a party of democratic justice, and in the center-left governments of Willy Brandt and Helmut Schmidt, it was the guardian of market economics. The FDP was a guarantor of continuity in the changing governments of the republic."

It is now the ambition of the 'realists' within the Green Party to be Germany's balance-of-power party.